Free music can pay as well as paid music, YouTube says

The difference between offering music for free and charging for
it has a special resonance as music is increasingly delivered by
apps running on smartphones, computers and eventually televisions
and car stereos. Small developers unable to negotiate their own
licenses with the labels, but who nonetheless wish to integrate
full-track playback into their apps, face a stark choice. They can
either integrate YouTube videos for free (Discovr), or integrate a
subscription service that limits non-subscriber listens to 30
seconds (MusicMapper).

Last week, Wired took YouTube to task for potentially damaging
the music industry by providing users and app developers with a
free, on-demand alternative to subscription services such as MOG,
Rdio, Rhapsody or Spotify.

"You raised some interesting issues with respect to some of
these applications out there," YouTube director of content
partnerships Chris Maxcy told Evolver.fm. "Our general philosophy
is that we like to make our content as widely available as
possible. We want to be the biggest entertainment platform in the
world, and we think we are already. We want to make sure that we
can get videos to people in a variety of ways… That's the positive
side, but whenever you have a goal like that, and you set your
system up that way, there's always the risk that there will be a
small number of people in the world who abuse your good nature and
the ability to get access to that content. With our APIs, the vast
majority of developers are complying with our terms of
service."

YouTube's API terms of service specify that developers who add
full-track playback from YouTube can only make non-commercial apps,
must show the videos, as opposed to stripping them out and only
playing the music, and must include YouTube's ads with those
videos.

Songza, Muziic, and other services crossed those lines in years
past, after which YouTube denied or threatened to deny them access
to its API.

"I think applications integrating music is a great idea, and
there are plenty of robust music services out there. I think it's
better for an application developer to… make sure they're complying
properly, versus thinking that they can temporarily and maybe
inappropriately access our platform," said Farhi. "They're going to
get shut down, and it's going to be a bad user experience because
the YouTube videos won't play anymore one day."

So, that settles that: If app developers push the YouTube
integration too far, they'll get cut off, and YouTube has shown
that it's willing to take such steps in the past. However, its
contention that free music pays as well as paid music indicates
that app developers would be wise to include both options: YouTube
videos for music fans who don't want to pay, and Rdio or some other
subscription service for those who do.

Ultimately, the real beneficiary of the revelation that free and
paid music can generate equivalent revenues could be Spotify, or
even Google itself.

Farhi noted Spotify's success on the Facebook platform in Europe, where
users embed Spotify songs within their feeds that anyone can hear
(the free version plays up to 20 hours of music per month). In
addition, Spotify integrates directly with Facebook as a music
sharing network. In the United States, however, Facebook users
overwhelmingly prefer YouTube for embedding music.

Spotify has long maintained that its allure lies in being able
to monetise the free listening that some people are always going to
engage in, through advertising, while those who are eventually
willing to pay for extra features (smartphone apps, offline
playback, higher sound quality, and no ads) can do so without
switching to a new music service and losing all of their playlist,
ratings, and friends.

If the lesson of YouTube vs. paid music services should teach
the music industry anything, it's that Spotify -- or something like
it, which finally joins the equally lucrative sectors of free and
paid music -- could boost overall revenue to a struggling recorded
music industry.